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Competition and Costing

1995 Winner
City of Indianapolis, IN

Award Sponsor
Innovations in American Government Awards

In times of fiscal solvency, governmental services are protected from the impact of the open market. Inefficient and over-priced services can result from this protection. When the solvency passes, governments are then expected to do more with less by continuing to provide and improve those services despite their declining tax base. Ultimately, some services must be cut, or contracted out to the lowest bidder, resulting in vast layoffs for government employees. A city that wishes to prevent these layoffs will be forced to raise taxes. This increased tax burden creates a disincentive to prospective developers and other potential sources for economic recovery.

 

By introducing competition from the open market, the City of Indianapolis has found a way to ensure that the government's services are--and will remain--competitive with those of the private sector. The program, Competition and Costing, provides city (generally union) employees with the resources and support to allow a competitive bid with the private sector. Specifically, they use Activity Based Costing to identify inefficiencies. This accounting tool, which provides the ability to determine the actual cost of a task without regard to the organizational structure, permits a workforce to identify and correct bureaucratic weaknesses.

 

For instance, in 1992 street repair work was put out for bid. Union employees who had previously performed this work wished to bid for it, but found that they could not compete. Activity Based Costing identified inefficiency at the middle management level, and the workers asked the city to lower the number of supervisors. The city responded by eliminating 18 of the department's 32 supervisors and then provided a consultant to assist them in preparing for the bid. Further, after inspecting the work to be done, the employees found that the job required only half the equipment and 60 percent of the labor. After cutting these inefficiencies as well, the union employees won the contract.

 

Overall, the bid reduced the City's cost by 25 percent and affirmed the core philosophy of Competition and Costing. Indeed, since the program was initiated, the City has lowered its annual operating costs by $26 million and retained 66 percent of the workforce, representing an overall savings of $136 million. Also, as the program empowers the street-level employee to innovate for efficiency, ownership of individual tasks is taking on a new meaning to the City's remaining employees.

 

In recent times, with the increasing financial crises experienced by cities across the nation, governments are struggling to find solutions that can improve services while reducing costs. Privatization is often seen as a pragmatic, if not draconian, measure. Indianapolis has created a model that permits government employees to save their jobs from the private sector. At the same time, the program saves the taxpayer money and increases the quality and efficiency of the service they receive. In all, by introducing competition from the open market, Indianapolis's program is an innovative model that shows how a government can do more with less.

Contact Information
This program is no
longer in existence.

IMAGES
 
 
VIDEO
 
Competition and Costing: Finalist Presentation

Indianapolis' Competition and Costing program, an Innovations in American Government Finalist, presented before the National Selection Committee in 1995.


 
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